Analysts cautiously optimistic about in-app purchases

Trent Nouveau, 16th February 2012

However, analysts warn the in-app purchase party is likely to be quite short-lived unless app developers get creative and Google shifts into high gear.

"As a revenue model, in-app purchase is very limited today. The vast majority of current in-app revenue is being generated by a tiny percentage of people who are highly-committed mobile game players," explained senior ABI analyst Mark Beccue.

"We don't believe the percentage of mobile game players making in-app purchases will grow significantly, so for in-app purchase revenues to grow, mobile developers other than game developers must adopt it."

According to Beccue, in-app purchase revenue growth has actually been hampered by Google, as Mountain View did not introduce in-app purchase to Android Market until July 2011 - and only recently added 17 mostly-European countries in December 2011.

"That is not the only area where Google has lagged in mobile application enablement. Pay-per-download is not an option in all markets for Android and subscription billing is not offered at all," said Beccue.

"Google is literally holding back the growth of mobile application monetization. We are keying many of our mobile app revenue forecasts around our guess of Google's plans."

Nevertheless, in-app purchases are expected to successfully expand well outside the gaming universe. Total mobile app revenues from pay-per-download, in-app purchase, subscriptions, and in-app advertising is set to soar over the next five years - increasing from a very respectable $8.5 billion in 2011 to an impressive $46 billion in 2016.